Previously and again last week, we alerted Supply Chain Matters readers to the increasing visibility to noteworthy supply challenges occurring at Pratt and Whitney related to its newly developed geared-turbofan aircraft engines. The development is significant since just was we anticipated, the weakest link in commercial aircraft supply chain ramp-up production cadence is indeed turning out to be Pratt.
Late last week, the United Technologies CEO, parent to Pratt warned the company’s investment community that Pratt will likely miss its 2016 customer engine delivery goals by 25 percent, amounting to a shortfall of 50 engines for aircraft manufacturers. The obvious question is which manufacturer will take the bulk of the impact.
CEO Gregory Haynes indicated the obvious in that Pratt’s airline customers were not happy with the news. Neither were UA stockholders who initiated an initial 2 percent sell-off in UA stock. This development represents yet another real-world example of significant supply chain glitches directly impacting stockholder perceptions.
Mr. Haynes further indicated that: ‘five parts are causing us pain this year”, due to supplier challenges in meeting Pratt’s current volume production and quality needs. There are approximately 800 parts for the high level bill of material for this new Pratt engine. The challenges are expected to extend into 2017.
A particular problem is the heart of this new engine, its newly designed aluminum titanium composite fan blades. Further indicated is that he has personally visited the shop where these blades are produced, an obvious indication of the high levels of management visibility being exhibited on the current supply challenges. Haynes indicated that today: “it takes 60 days of cycle time to build these blades and the through the shop and it needs to get to 30 days.” Obviously, that is a significant challenge for a highly engineered component, a doubling of production cycle time.
In 2014, aluminum metals provider Alcoa and Pratt announced a 10 year $1.1 billion agreement to supply state-of-the-art engine jet engine components. That included the forging of the new aluminum-titanium fan blade along with a proprietary manufacturing process. Pratt’s engineering design is different than that of GE Aircraft and its partners Snecma and CFM International. Whereas the latter has invested in carbon-fiber and ceramic composites for materials and manufacturing automation, Pratt has bet on a revolutionary new gearbox and aluminum-titanium composites to allow the engine to burn cooler, with fewer parts and more fuel efficient technologies. Supply chain design and deployment strategy is different along with approaches to manufacturing automation as well. There further exists a fierce competitiveness among existing aircraft engine manufacturers to demonstrate their new fuel saving gains and build ongoing customer loyalty and long-term commitments to each supplier’s new engine designs
Mr. Haynes assured investors that Pratt has a well-defined plan identified to address the current supply chain ramp-up challenges. Obviously, that should provide some assurances.
At stake is the ongoing production ramp-up of the Airbus A320 neo which first certified with the new Pratt engine. Certification of the neo version with CFM International engines is in-process, and with the current visible challenges for Pratt, Airbus production operations teams must now deal with the option of whether to shift current backlog order fulfillment more to CFM powered versions to insure attainment of Airbus’s 2016 and perhaps 2017 production commitments for the overall market. There is obviously a lot of market visibility on Airbus right now from its A320 customers.
Bombardier, developer and manufacturer of the new C-Series single-aisle aircraft have placed a current singular bet on the Pratt fuel efficient design, and thus have already had to warn its investors of a production cutback.
While a buffering effect has been the current historically lower-cost of aviation fuel, airlines, particularly lower-fare startups want to gain a market advantage in lower operating costs.
Commercial aircraft supply chains will indeed be one of the dominant headlines stories for the weeks and months to come. A significant theme will be the classic trade-offs of product design and design for supply chain scalability.
Stay tuned since further developments are likely.
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